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We argue that institutional brokerage networks facilitate liquidity provision and mitigate the price impact of large non-information-motivated trades. Using commissions, we map trading networks of mutual funds (institutions) and their brokers. Central funds (institutions) tend to outperform their peripheral counterparts in terms of return gap (execution shortfall). This outperformance is more pronounced when funds experience large outflows and for large trades in less liquid stocks. Central brokers can deliver superior trade execution compared to peripheral brokers, but mainly for central institutions. We use the collapse of Lehman Brothers as a quasi-natural experiment to establish the likely causality of our findings. [ABSTRACT FROM AUTHOR]

We conjecture that mutual funds with large shares of outstanding bond issues are more inclined to internalize the negative price spillovers of fire sales and thus sell their holdings in those issues, to a lower extent, when they experience redemptions. We provide evidence consistent with this conjecture and further show that ownership concentration limits bonds' exposures to flow-induced fire sales. We exploit variation in negative spillovers arising from the Fed's SMCCF to confirm the economic mechanism and explore our findings' implications for fund performance and fire-sale spillovers to other funds. [ABSTRACT FROM AUTHOR]

We show that lender of last resort (LOLR) policy exacerbates bank interconnectedness. Using novel micro-level data, we analyze LOLR's haircut gaps: the differences between the private market and central bank haircuts. LOLR policy incentivizes banks to increase pledging and holdings of higher haircut-gap bonds, especially those issued by domestic and systemically important banks. Effects only apply to banks, not to nonbanks without LOLR access. LOLR funding revives bank bond issuance associated with higher haircut gaps and increases the subsequent correlation between pledging and issuing banks' bond prices, in particular during periods of low-market returns and for domestic, systemically important banks. [ABSTRACT FROM AUTHOR]

The SEC's 2016 Concept Release summarizes the ongoing debate regarding the usefulness of market risk disclosures and calls for additional discussion. We respond to the SEC's call and investigate market risk disclosures. Using textual analysis, we evaluate and classify the qualitative content of market risk disclosures and expect that more informative disclosures are associated with improved liquidity, consistent with disclosure theory. We find that informative textual contents of market risk disclosures are associated with higher liquidity levels and lower liquidity uncertainty (i.e., an improved investors' information environment). Our study is relevant to the ongoing discussion regarding the usefulness of market risk disclosures, calls for more detailed regulatory guidance for market risk disclosures, and contributes to the literature on stock liquidity and risk factor disclosures. [ABSTRACT FROM AUTHOR]

The classic view assumes banks prioritize immediate repayment by selling assets until default. We endogenize run frequency and study how general settlement rules trade off liquidity provision net of fire sale losses against induced run incentives. Panic runs are eliminated when all illiquid assets are sold under orderly resolution, but liquidity provision in a run is minimal. When suspension after some fire sales is followed by immediate liquidation, run frequency falls then rises in suspension delay. Thus, optimal suspension may require some sale of illiquid assets, in contrast to MMF norms. Ex post discretion induces excessive liquidation and more frequent runs. (JEL D8, G21) [ABSTRACT FROM AUTHOR]

Systemic risks––pandemics, economic recessions, professional precarity, political volatility, and climate emergencies––increasingly erode previously taken-for-granted stabilities and consumers' confidence in the future. How do consumers manage risk and uncertainty when economic and ontological security are on the decline? Traditionally, consumers have built a sense of security through solid consumption (e.g. home ownership, accumulating possessions). A four-year ethnography of digital nomadism, however, demonstrates that looming uncertainty can render solid consumption a source of vulnerability and an unwanted anchor in turbulent times that call for agility and adaptability. We outline the emergence of liquid consumer security, defined as a form of felt security that stems from avoidance of solid consumption and its risks and responsibilities. Liquid consumer security inheres in the absence of ownership, attachments, or rootedness, and is derived from circumventing the temporal demands, financial liabilities, and commitments that solid consumption requires, which emerge as sources of risk. It is achieved through a recursive process of engaging in three strategies: (1) solid risk minimization; (2) security reconstruction through the liquid marketplace; and (3) ideological legitimation. Contributions to consumer risk and security, liquid consumption, social theories of risk, and digital nomadism are discussed. [ABSTRACT FROM AUTHOR]

We study how derivatives (with nonlinear payoffs) affect the underlying asset's liquidity. In a rational expectations equilibrium, informed investors expect low conditional volatility and sell derivatives to the others. These derivative trades affect different investors' utility differently, possibly amplifying liquidity risk. As investors delta hedge their derivative positions, price impact in the underlying drops, suggesting improved liquidity, because informed trading is diluted. In contrast, effects on price reversal are ambiguous, depending on investors' relative delta hedging sensitivity (i.e., the gamma of the derivatives). The model cautions of potential disconnections between illiquidity measures and liquidity risk premium due to derivatives trading. [ABSTRACT FROM AUTHOR]

By employing a dynamic model with two limit order books, we show that fragmentation is associated with reduced competition among liquidity suppliers and lower picking-off risk of limit orders. Due to these countervailing channels, the impact of fragmentation on liquidity and welfare differs with asset volatility: When volatility is high (low), liquidity and aggregate welfare in a fragmented market are higher (lower) than in a single market. However, fragmentation always shifts welfare away from agents with exogenous trading motives and toward intermediaries. We empirically corroborate our model's predictions about liquidity. Our model reconciles the mixed results in the empirical literature. [ABSTRACT FROM AUTHOR]

We characterize the interaction between banks' liquid assets purchases and deposit issuance decisions. Using global games, we derive a liquidity multiplier : the amount of deposits a bank can create when endowed with one additional unit of liquid asset to maintain a given level of liquidity risk. In our central theorem, we prove it is larger than unity. This entails that banks have a special role in enhancing liquidity provision, "multiplying" liquid assets into a larger quantity of deposits. Our theory has implications for banks' balance sheet choices, the pricing of liquid securities, and the role of public liquidity provision. [ABSTRACT FROM AUTHOR]

Using regulatory data, we study German bank lending in countries targeted by financial sanctions. We find that domestic banks in Germany reduce lending in sanctioned countries, whereas their foreign bank affiliates outside Germany increase lending. In some cases, this is because the bank affiliates' host countries have not imposed sanctions themselves. However, even German bank affiliates in host countries that enact sanctions like Germany increase lending if these host countries lack strong institutions and anticrime policies. These findings suggest that even universally adopted sanctions distort bank capital flows and competition if the level of their enforcement varies across bank locations. Authors have furnished an Internet Appendix , which is available on the Oxford University Press Web site next to the link to the final published paper online [ABSTRACT FROM AUTHOR]

Using account-level credit card data from a large Turkish bank, we study the impact of a unique credit card policy that increases minimum payment on consumption and debt repayment. We show that the policy reduces credit card spending and debt, boosts existing debt repayment, and reduces credit card delinquency. The credit card debt of affected consumers falls on average by 50 |$\%$| two years into the policy's implementation. An increase in minimum payment has a stronger effect than does a decrease of a similar magnitude. We build a benchmark life cycle model with soft liquidity constraint to explain the reduction in credit card spending. Authors have furnished an Internet Appendix , which is available on the Oxford University Press Web site next to the link to the final published paper online. [ABSTRACT FROM AUTHOR]

We present evidence that several popular low-frequency measures of effective spread suffer from a volatility-induced bias and that volatility is the primary driver of the variation of these liquidity proxies. Using data for U.S. equities and major foreign exchange rates, we show that the bias arises when the effective spread is small relative to volatility. We document that the bias has become more acute over time and show that volatility-biased measures fail to replicate some well-known results in empirical finance. We conclude by providing guidance on the choice of low-frequency measures in empirical applications. Authors have furnished an Internet Appendix , which is available on the Oxford University Press Web site next to the link to the final published paper online. [ABSTRACT FROM AUTHOR]

We study the impact of the refinancing channel of monetary policy on very small and medium-sized businesses. Using data covering the near universe of these businesses, we find that increased household refinancing reduces the probability that a business exits or exhausts its debt capacity in the calendar year, as well as 6 years after the first exposure. It also helps younger businesses maintain credit relationships. Financial factors, like business liquidity, as well as local demand dependence, amplify these effects, especially for very small businesses. These results suggest that the refinancing channel of monetary policy can have large long-run effects on local economies. Authors have furnished an Internet Appendix , which is available on the Oxford University Press Web site next to the link to the final published paper online. [ABSTRACT FROM AUTHOR]

Using firm-level survey information, we investigate whether relationship lending affects firms' employment decisions in the face of negative sales shock. We find that firms with a durable relationship with their main bank display significantly less employment growth sensitivity to such shocks, especially where these are transitory. The result is stronger for younger and smaller firms that benefit from tighter bank-firm relationships, and for firms in sectors or economic environments where the costs of employment adjustment are greater. Our findings indicate that relationship lending provides liquidity insurance to firms to meet their demand for labor hoarding. [ABSTRACT FROM AUTHOR]

Economically insignificant tick sizes encourage undercutting behavior, thus harming market quality. Theoretical work shows that increasing tick sizes in unconstrained markets reduces undercutting and improves market quality. Equity market pricing grids are generally too coarse to test this prediction. We examine a cryptocurrency market with infinitesimal tick sizes where undercutting limit orders acquire price priority without meaningful economic cost. We show that increasing tick sizes reduces undercutting behavior, increases liquidity provision and quoted depth, and reduces transaction costs for institutional and retail-sized trades while decreasing short-term volatility. Tiny tick sizes are suboptimal, supporting increased minimum trading increments in tick-unconstrained markets. [ABSTRACT FROM AUTHOR]

We examine diseconomies of scale for two different investment approaches: quantitative and fundamental. Using separate account (SA) data where the investment approach is self-identified, we find that fundamental SAs exhibit greater diseconomies of scale than quantitative SAs. Looking at liquidity costs, we find that quantitative SAs hold more diversified portfolios of higher liquidity stocks than fundamental SAs, thereby reducing their expected liquidity costs. We also find that consistent with lower information processing/hierarchy costs, the speed of information diffusion is higher for quant SAs. Accounting for these differences helps to explain the differences in diseconomies of scale. [ABSTRACT FROM AUTHOR]

While share pledging is a widespread leveraged financing practice in global stock markets, its potential impact on firms' exposure to market risk remains a topic of concern. In the context of the Chinese market, this study investigates the relationship between insiders' share pledging pressure and stock liquidity risk, with a particular focus on stock liquidity commonality. Using data from Chinese firms listed between 2009 and 2022, we find a positive correlation between heightened share pledging pressure and increased stock liquidity commonality. To precisely capture the margin call pressure arising from share pledging, we introduce an innovative method that considers both the price at which shares are pledged and their subsequent price dynamics. This relationship persists after addressing endogeneity concerns. Furthermore, we find that firms under significant share pledging pressure often resort to earnings manipulation, which exacerbates stock liquidity commonality. The findings underscore the significance of understanding the risks and impacts of share pledging in terms of liquidity risk. Insiders who utilize share pledging as a financing channel face a delicate balance between the benefits of expanded funding sources and the risks of losing control due to sustained stock price declines. This study provides valuable insights for investors, policymakers, and regulatory authorities in managing the potential liquidity risks associated with share pledging activities in the Chinese market. [ABSTRACT FROM AUTHOR]

I examine global dynamics in a monetary model with overlapping generations of finite‐horizon agents, nonseparable preferences over consumption and real money balances, and a binding lower bound on nominal interest rates. Debt targeting rules exacerbate the possibility of self‐fulfilling liquidity traps, for agents expect austerity following deflationary slumps. Conversely, activist but sustainable fiscal policy regimes—implementing intertemporally balanced tax cuts and/or transfer increases in response to disinflationary trajectories—are capable of escaping liquidity traps and embarking inflation into a globally stable path that converges to the target. Should fiscal stimulus of last resort be overly aggressive, however, spiral dynamics around the liquidity‐trap steady state exist, causing global indeterminacy. [ABSTRACT FROM AUTHOR]

Market freezes are an interesting and theoretically challenging phenomenon —they are observed empirically, but cannot occur in standard models. This paper develops a formal theory of recurrent freezes emphasizing liquidity and self‐fulfilling prophecies. While it is well understood how to get hot and cold spells, where prices and quantities fluctuate, we get asset market freezes and thaws where trade completely stops and starts. The simplest specification gets this using negative asset returns. Other specifications use information frictions or fixed costs. We also consider credit freezes, analyze the extent to which the decentralized nature of trade matters, and discuss policy implications. [ABSTRACT FROM AUTHOR]

How do real interest rates affect financial fragility? We study this issue in a model where bank borrowing is subject to rollover risk. A bank's optimal borrowing trades off the benefit from investing additional funds into profitable assets with the cost of greater risk of a run by creditors. Changes in the interest rate affect the price and amount of borrowing, which influence bank fragility in opposite directions. Thus, the marginal impact of changes to the interest rate on bank fragility depends on the level of the interest rate. Finally, we derive testable implications that may guide future empirical work. [ABSTRACT FROM AUTHOR]

The Great Kanto Earthquake of 1923 caused serious damage to firms and banks in Yokohama City. We explore the role of the financial support by the Bank of Japan (BoJ) through local banks in a firm's survival and recovery from the natural disaster. We find that the small‐ and medium‐sized firms (SMEs) that had a relatively large correspondent bank with a large number of bills rediscounted by BoJ had a higher likelihood of survival but lower growth after the earthquake. Liquidity supply by the central bank for recovery from a negative shock can have both positive and negative impacts. [ABSTRACT FROM AUTHOR]

We find that customer firms with more concentrated supplier bases tend to hold higher levels of cash reserves. The positive relation between supplier‐base concentration and cash holdings is more pronounced for firms with nonstate ownership, higher market competition, worse inventory efficiency, more relationship‐specific investment, central positions in the production networks, and headquarters located in regions with lower levels of financial development. Furthermore, we show that debt issuance enhances firms' cash holdings when they have concentrated suppliers, and supplier‐base concentration increases firms' cash spending on R&D investment. Our study highlights the importance of supplier structure in shaping corporate cash policy. [ABSTRACT FROM AUTHOR]

The second Markets in Financial Instruments Directive (MiFID II) mandated the unbundling of payments for research and trading. This research explores whether the impact of MiFID II differs between large and small firms in terms of analyst coverage and stock liquidity. Focusing on the UK stock markets we find a significant drop in analyst coverage on the Main Market, which leads to a deterioration in market liquidity. In contrast, the requirement of AIM firms to retain a Nominated Adviser, who often provides research coverage, has mitigated the impact of MiFID II. [ABSTRACT FROM AUTHOR]

Investment in and allocating investment resources to business activities is done through the financial market and the banking credit market is part of this market. The most role of banks in the financial market is to give credit to customers. In this matter the capital adequacy assessment and credit risk are important and their control is considered as one of the key effective factors in bank operation and plays a major role in banks and financial institutes’ stability. So, the aim is to determine the effect of macroeconomic variables (GDP, liquidity, inflation rate and exchange rate) on Capital adequacy, liquidity risk and credit risk. The results showed that macroeconomic variables have a significant effect on banking risks. [ABSTRACT FROM AUTHOR]

We identify the population shares of poor hand-to-mouth households, wealthy hand-to-mouth households and non hand-to-mouth households in Belgium. We apply the methodology proposed by Kaplan & Violante (2014) and Kaplan et al., (2014) to the Belgian component of the Household Finance and Consumption Survey. We find that the fraction of hand-to-mouth households in Belgium is substantial and predominantly consists of wealthy hand-to-mouth households. We also compare the observable characteristics and marginal propensities to consume (MPCs) of the three household types. Belgian wealthy hand-to-mouth households have characteristics that resemble those of the non hand-to-mouth households, while their MPCs are often more similar to those of the poor hand-to-mouth households. This pleads for giving a unique place to each type of household when evaluating the effects of fiscal policy. [ABSTRACT FROM AUTHOR]

We study the capital market effects of information centralization by exploiting the staggered implementation of digital storage and access platforms for regulated financial information (Officially Appointed Mechanisms, or OAMs) in the European Union. We find that the implementation of OAMs results in significant improvements in capital market liquidity, consistent with the notion that OAMs lower investors' processing costs. The findings are more pronounced when processing costs are high to begin with, that is, when firms (1) are small and receive low business press coverage and (2) have high levels of retail ownership. We then identify a mechanism through which centralization facilitates capital market effects: information spillovers. First, we find that liquidity improvements are larger when OAMs have features that easily allow investors to search for peer firm information. Second, liquidity improvements are larger for firms with a high share of industry peers operating on the same OAM and for firms with a high share of small, low‐coverage peers on that OAM. Third, around the annual report release dates of peer firms, focal‐firm liquidity improves and focal‐peer stock return synchronicity increases. Overall, our evidence suggests that, even in a modern information age, information centralization improves capital market liquidity and facilitates the acquisition and use of peer firm information. [ABSTRACT FROM AUTHOR]

We show that the largest increase in unemployment benefits in US history had large spending impacts and small job-finding impacts. This finding has three implications. First, increased benefits were important for explaining aggregate spending dynamics—but not employment dynamics—during the pandemic. Second, benefit expansions allow us to study the MPC of normally low-liquidity households in a high-liquidity state. These households still have high MPCs. This suggests a role for permanent behavioral characteristics, rather than just current liquidity, in driving spending behavior. Third, the mechanisms driving our results imply that temporary benefit supplements are a promising countercyclical tool. (JEL E21, E24, E32, E62, E71, G51, J65) [ABSTRACT FROM AUTHOR]

Poor entrepreneurs must frequently choose between business investment and children's education. To examine this trade-off, we exploit experimental variation in short-run microenterprise growth among a sample of Indian households and track schooling and business outcomes over eleven years. Treated households, who experience higher initial microenterprise growth, are on average one-third more likely to send children to college. However, educational investment and schooling gains are concentrated among literate-parent households, whose enterprises eventually stagnate. In contrast, illiterate-parent households experience long-run business gains but declines in children's education. Our findings suggest that microenterprise growth has the potential to reduce relative intergenerational educational mobility. (JEL I21, I26, I32, J13, L25, L26, O12) [ABSTRACT FROM AUTHOR]

This is a pioneering study that undertakes a comparative analysis assessing the annual intermediation efficiency of public versus private banks in Egypt. Moreover, liquidity risk is a major threat facing banks in their efforts to sustain financial stability. Thus, this study is the first to model the determinants of liquidity risk in public and private banks in Egypt while examining the impact of banks' intermediation efficiencies on their liquidity risk levels. The study employs advanced nonparametric econometric approaches on a sample of Egyptian public and private banks from 2014 to 2022. The data envelopment analysis is used in estimating banks' intermediation efficiency scores, while the quantile regression analysis is applied to examine the impact of bank intermediation efficiency on liquidity risk under different liquidity risk quantiles. The findings indicate that public banks show consistent superiority in terms of their financial intermediation efficiency levels compared to private banks. Moreover, the paper findings demonstrate the negative significant relationship between bank intermediation efficiency and liquidity risk while highlighting the higher significant positive impact of intermediation efficiency on reducing the liquidity risk of banks that are characterized by undertaking high liquidity risk levels. Furthermore, contrary to general assumptions, this study's findings demonstrate that the significance of micro- and macro-level determinants of a bank's liquidity risk is dependent on its prevailing liquidity risk level. Hence, the positive impact of equity capital, asset concentration, size, and growth in gross domestic product and the negative effect of asset quality on bank liquidity risk vary under banks' different liquidity risk quantiles. [ABSTRACT FROM AUTHOR]

Copyright of Environmental & Social Management Journal / Revista de Gestão Social e Ambiental is the property of Environmental & Social Management Journal and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Copyright of Environmental & Social Management Journal / Revista de Gestão Social e Ambiental is the property of Environmental & Social Management Journal and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Banking and risk are synonymous concepts. The risk concepts for both conventional and Islamic banks are broadly similar, and liquidity risk is among the most important risks that all banks are exposed to. The management process of liquidity risk, which arises when banks do not have enough assets to meet their liabilities at maturity, may differ in conventional and Islamic banks. This study aims to present a comparative analysis of the liquidity determinants of conventional and Islamic banks operating in Turkey. Using the data of 3 Islamic and 17 conventional banks for the period between 2011Q1-2022Q2, the analysis, which also aims to see the short and long-term effects, concludes that the determinants of liquidity risk for conventional and Islamic banks are largely similar. However, the liquidity of Islamic banks is more sensitive to bank-specific variables. The findings showed that Islamic banks, which cannot use all of the conventional liquidity management tools in the liquidity management process for different reasons, have to hold higher liquid assets than conventional banks in the short term, even if they are balanced in the long term. [ABSTRACT FROM AUTHOR]

We construct a stochastic volatility model considering stochastic liquidity risks when valuing variance and volatility swaps with discrete sampling. We base our model on Heston stochastic volatility, which is adopted for the modeling of stock prices when the market is perfectly liquid. Stock dynamics are further revised by discounting their prices through the employment of mean reverting market liquidity. We convert the stock dynamics under the physical measure into the one under a risk‐neutral measure via measure transform, with which the analytical valuation of variance and volatility swaps is realized. By taking the limit of sampling frequency, we further consider how both swaps with continuous sampling can be priced. Numerical implementation is finally carried out, with which the capability of the constructed model in capturing the influence of the two common types of financial risks can be clear. [ABSTRACT FROM AUTHOR]

Implementation lags are a concern of policymakers as they may reduce the efficacy of fiscal policy. Using a standard New Keynesian model with an effective lower bound on the nominal interest rate, we compare the impacts of fiscal stimulus on output across various lengths of implementation lag. We show that despite concerns among policymakers, implementation lags may enhance the efficacy of government purchases on output when the economy is caught in a liquidity trap. [ABSTRACT FROM AUTHOR]

We show both theoretically and empirically how trade credit financing may magnify the impact of activity shocks on corporate liquidity. Using unique daily data on payment defaults on suppliers in France, we quantify the magnitude of the short-term cyclical liquidity stress induced by trade payment obligations, exploiting the COVID-19 crisis as an exogenous shock. A one-standard-deviation rise in net trade credit position increases firms' default probability by 10% during the lockdown. We find higher impacts for downstream sectors – up to 30% increase in the retail trade – for financially constrained firms, and a contraction in investment. (JEL E32, G32, G33, H12, H32) [ABSTRACT FROM AUTHOR]

We investigate how a positive relation between inflation and capital investment (the Mundell–Tobin effect, MT‐E) affects optimal monetary policy in a framework that combines overlapping generations and new Monetarist models. We find that inflation rates above the Friedman rule are optimal if and only if there is an MT‐E. In the absence of the MT‐E, the Friedman rule is optimal. With an MT‐E, increasing inflation above the Friedman rule leads to a first‐order welfare gain from increasing capital investment, and only to a second‐order welfare loss from reducing consumption in markets where liquidity matters. [ABSTRACT FROM AUTHOR]

We analyze the role of retail central bank digital currency (CBDC) and reserves when banks exert deposit market power and liquidity transformation entails externalities. Optimal monetary architecture minimizes the social costs of liquidity provision, and optimal monetary policy follows modified Friedman rules. Interest rates on reserves and CBDC should differ. Calibrations robustly suggest that CBDC provides liquidity more efficiently than deposits unless the central bank must refinance banks and this is very costly. Accordingly, the optimal share of CBDC in payments tends to exceed that of deposits. [ABSTRACT FROM AUTHOR]

The return on government debt is lower than that of assets with similar payoffs. We study optimal debt management and taxation when the government cannot directly redistribute toward the agents in need of liquidity but otherwise has access to a complete set of linear tax instruments. Optimal government debt provision calls for gradually closing the wedge between the returns as much as possible, but tax policy may work as a countervailing force: as long as financial frictions bind, it can be optimal to tax capital even if this magnifies the discrepancy in returns. [ABSTRACT FROM AUTHOR]

We investigate the empirical relation between country governance quality and stock market liquidity, as well as information asymmetry, using a sample of non-U.S. stocks from 17 emerging markets listed on the NYSE between 2004 and 2019. We find that non-U.S. stocks from emerging markets with higher democracy quality tend to have narrower spreads and larger depth, suggesting improved liquidity. Higher autocracy levels, on the other hand, are associated with wider spreads and lower depth, indicating poorer liquidity. Additionally, stronger democracy and polity qualities are linked to reduced price impact, while heightened autocracy levels are associated with increased price impact and a higher probability of informed trading. Moreover, we show that changes in our liquidity and information asymmetry measures significantly relate to changes in the country governance index over time. Our results remain remarkably robust across regions and when using different measures of liquidity and information-based trading. [ABSTRACT FROM AUTHOR]

This article analyzes the reversal strategy for the five most capitalized developed markets using portfolio analysis and the Fama–Macbeth (FM) regression method. The results of the portfolio analysis showed that the unconditional reversal strategy is persistent only for Germany and Japan. After testing the strategy on firms with higher expected costs of liquidity provision, however, the reversal returns become stronger across all markets. Nevertheless, the strongest support for the reversal strategy was found using the FM methodology while controlling for notable firm-related characteristics. Importantly, the reversal returns were strongly related to market volatility, which proxies for periods when the cost of provision of market liquidity is higher. [ABSTRACT FROM AUTHOR]

This paper presents a computationally tractable optimization model for cashflow-driven investment where the aim is to find asset portfolios whose future payouts cover given liability payments as well as possible. While current industry solutions are largely based on expected future cash flows, we use a stochastic optimization model that seeks portfolios that give the best possible match across time as well as scenarios. Cashflow matching across scenarios is controlled by risk aversion while the timing is driven by illiquidity of money markets. When illiquidity increases, the hedging strategy quickly shifts towards portfolios suggested by deterministic models, but significant uncertainty remains. The model can incorporate hundreds of quoted instruments in the construction of optimal hedging strategies. The hedging strategies are able to employ any statistical connections between the liabilities and publicly quoted assets. The model is solved with simple Monte Carlo approximations and off-the-shelf convex optimization software. Besides optimal hedging strategies, we find the least cost of hedging which provides a market-consistent valuation based on the current quotes and the liquidity factors as well as the views and risk preferences of the investor/regulator. The approach is illustrated by pricing and hedging defined benefit pension liabilities which depend on uncertain longevity developments and the consumer price index. The hedging strategies are constructed from 128 publicly quoted instruments including index-linked bonds and equities. We find that the optimized hedging strategies achieve lower risk at a lower cost than the strategies obtained by matching expected cashflows. The hedging-based liability valuations are robust with respect to model parameters and the additional risk reduction achieved by optimization does not add much to the overall hedging cost. [ABSTRACT FROM AUTHOR]

We examine changes in market liquidity when several popular U.S. retail brokers restrict client trading in GameStop stock over a six-day period in early 2021 due to higher clearinghouse deposit requirements. When retail investor participation in a high-attentionstock becomes restricted, trading activity declines and trading venue shifts occur – there is less trading in dark markets and more fragmented trading across U.S. stock exchanges. We also find that when a stock order flow mix becomes comprised of fewer retail investors and a higher concentration of institutional investors, the quoted bid-ask spread widens, and trading cost measures rise significantly. [ABSTRACT FROM AUTHOR]

Equity auctions display several distinctive characteristics in contrast to continuous trading. As the auction time approaches, the rate of events accelerates causing a substantial liquidity buildup around the indicative price. This, in turn, results in a reduced price impact and decreased volatility of the indicative price. In this study, we adapt the latent/revealed order book framework to the specifics of equity auctions. We provide precise measurements of the model parameters, including order submissions, cancelations, and diffusion rates. Our setup allows us to describe the full dynamics of the average order book during closing auctions in Euronext Paris. These findings support the relevance of the latent liquidity framework in describing limit order book dynamics. Lastly, we analyze the factors contributing to a sub-diffusive indicative price and demonstrate the absence of indicative price predictability. [ABSTRACT FROM AUTHOR]

This study investigated the extent to which the low-risk anomaly is present in a pooled sample of nine African frontier equity markets from March 2004 to July 2023. Portfolio-level analysis was used to investigate the total stock returns of equally weighted quintile portfolios sorted on historical volatility. The presence of a monotonic relationship between historical volatility and subsequent returns was evaluated using monotonicity tests, controlling for possible mediating variables. The results revealed evidence of a statistically significant low-volatility premium, except during bull markets. These findings imply that investors can expect to earn higher returns by allocating to stocks with lower historical volatility, but only during bear markets. These results hold for realistic portfolio construction constraints, such as (il)liquidity and high transaction costs. [ABSTRACT FROM AUTHOR]

Copyright of Revista Foco (Interdisciplinary Studies Journal) is the property of Revista Foco and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Liquidity index is used to measure the relative consistency of natural soils, making it possible to evaluate the stiffness degree and strength of clays. However, a systematic understanding of the relationship between the undrained shear strength and the liquidity index remains unclear. While some studies are being conducted on this putative relationship, the theoretical foundation is still lacking. This study proposes a new undrained shear strength prediction model based on the Mohr–Coulomb failure criterion and the critical state theory. A database of 103 soil samples from 18 research is utilised to validate the model's applicability. The results reflect a consistent level of accuracy. The proposed model has an obvious advantage and has potential for predicting the undrained shear strength of clays. [ABSTRACT FROM AUTHOR]

This paper employs a numerical approach to investigate the impact of liquidity shocks on European options in modeling markets. To accurately capture the behavior of European options under liquidity shocks, a coupled system of differential equations is employed, consisting of a degenerate parabolic equation and a diffusion-free equation. The primary focus is on developing and analyzing implicit-explicit methods for numerically simulating European option pricing, specifically considering the presence of liquidity shocks while ensuring the positivity of the solution. The paper also includes convergence analysis and establishes the discrete comparison principle for the developed methods. Numerical experiments are conducted using both uniform and nonuniform meshes to validate the theoretical findings, demonstrating the efficiency and accuracy of the proposed methods. [ABSTRACT FROM AUTHOR]

The aim of this research is to determine the effect of working capital and liquidity on the company's profitability. The method used is causal quantitative, which looks at cause and effect relationships or relationships that are influenced and influenced. Data obtained from the Indonesian Stock Exchange with 10 populations. Sample selection used purposive sampling with a total of 30 data analyzed using multiple linear regression analysis techniques. The t hypothesis test explains that working capital efficiency has an influence on profitability while liquidity has no influence on profitability. The results of the hypothesis f test explain that working capital and liquidity have a simultaneous influence on profitability if tested simultaneously. Another result is 66.7% profitability influenced by working capital and liquidity variables. [ABSTRACT FROM AUTHOR]

In modern times, economic security stands as one of the primary strategic objectives for any state. However, achieving economic security is unattainable without the stable operation of enterprises. Amidst a constantly evolving external environment, the economic security of enterprises becomes a prerequisite for their survival. To this end, evaluating the financial indicators of enterprises and identifying areas for improvement are imperative. The state of an enterprise’s financial indicators is traditionally regarded as the primary factor ensuring its economic security, as these indicators reflect the ultimate outcome of its operations. To analyze the financial indicators of an enterprise effectively, it is essential to establish evaluation criteria and parameters. The significance of accurately defining criteria for evaluating the financial indicators of a company primarily stems from the necessity to ensure its security and formulate and execute effective management decisions. Relevance of the topic. Today, enterprises operate amidst various uncertainties such as crises, pandemics, inflationary processes, and price fluctuations observed worldwide. In such conditions, enterprises are compelled to operate efficiently, compete for market influence and income, accurately assess and enhance financial indicators, and identify, analyze, and neutralize negative effects that may threaten economic security. Conversely, enterprises should promptly analyze their financial indicators to develop a set of measures aimed at bolstering their competitive positions and enhancing the efficiency of their operations. These aspects underscore the relevance of the article’s topic. The purpose of the article is to study financial indicators, their evaluation, determination of resources for increasing profit and profitability, and the impact of those indicators on the financial activity of enterprises and economic security. Evaluating the financial indicators of enterprises aims to determine the indicators for analyzing their current financial situation and identifying areas and actions required to enhance these indicators. Additionally, it involves exploring methods to influence the economic security system of enterprises through the improvement of financial indicators. Achieving these objectives necessitates accurate assessment, forecasting, and management decisions to enhance the financial situation of the enterprise. Research methods. The article was written using theoretical-methodical approaches, systematic approach, comparative analysis, factor analysis, graphic analysis and economic-statistical methods. Scientific innovation. It is justified that evaluating the financial condition of an enterprise and assessing its economic security complement and depend on each other, being inseparably linked. Economic security can only be fully ensured in conditions of continuous financial development. It has been established that when evaluating the financial condition of the enterprise, all its economic indicators should be monitored, enabling the enterprise to swiftly and effectively adapt to changing environmental conditions. Given these considerations, the importance of closely examining, enhancing, and bolstering the financial stability of an enterprise’s financial indicators in ensuring economic security has been justified. Additionally, the authors have proposed the primary directions for improving the financial indicators of an enterprise. [ABSTRACT FROM AUTHOR]